Oil rally continues as output cuts appear to reduce inventories

SYDNEY (Bloomberg) --Oil extended its rally into a fifth day on signs that a glut might be easing as leading producers slash their activity.

Futures in New York climbed almost 5%, after rising 3.1% on Monday, in the longest streak of gains since July. Genscape reported a 1.8 million-barrel build in inventories in Cushing, Oklahoma, the delivery point for West Texas Intermediate crude. If the U.S. government reports a similar number Wednesday, it would mark the smallest increase at the hub since mid-March.

The discount on crude for June delivery relative to July, a structure known as contango, tightened to its narrowest in about a month, indicating that concerns about oversupply may be easing.

Prices

• West Texas Intermediate for June delivery rose 93 cents to $21.32 a barrel on the New York Mercantile Exchange at 8:11 a.m. Sydney time.
• June WTI advanced 61 cents to settle Monday at $20.39 a barrel.

Brent for July settlement gained 76 cents to close at $27.20 a barrel on London’s ICE Futures Europe.

In the U.S., Texas regulator Ryan Sitton said Monday on Bloomberg TV that an effort to mandate oil production cuts is “dead” a day before the state was set to vote on the measure. Even without quotas, though, explorers are voluntarily shutting in massive volumes of oil, with Exxon Mobil Corp., Chevron Corp. and ConocoPhillips planning to curb as much as 660,000 barrels a day of combined American output by the end of June.

OPEC+ output cuts kicked in May 1, although the bloc pumped the most in almost 30 years in April as members waged a price war, keeping supplies high even as coronavirus lockdowns saw demand dissipate. It will take time to work through that inventory.

Canadian heavy crude surged to its strongest price versus futures since at least 2008 as Enbridge Inc. agreed to open part of its pipeline system for crude storage.